Service Delivery

BAI Banking Strategies just published their annual list of the 25 most read articles of 2017. We are pleased to be a regular contributor to BAI thought leadership and gratified that four of our articles made the “most read” list.

Is there an ideal branch format? In whatever bank publication you pick up today, it seems someone has an opinion on the one ideal branch design. It’s smaller, heavily automated and uses digital signage. The real answer is: “It depends … on lots of things.” But there are seven key elements — read more here.

It seems as though every banking journal today has an article about branch closures or consolidations. Less reported is that banks still open about 1,000 or more new branches annually. In fact, banks opened nearly 6,000 new branches in the five-year period between 2011 and 2015, according to the latest FDIC update—and are on pace to unveil nearly 900 more this year. Here are 10 insights on the factors that drive a successful branch launch.

Compelling digital offerings aren’t just a consumer expectation anymore. They are a necessity to stay competitive. But many financial institutions, especially smaller ones, are stuck in a holding pattern—with too many confusing options and choices to grasp a clear sense of how to move forward. What’s the best way to harness new digital technology to deliver the desired results? How should you select the right partner? What key strategies lead to successful implementation? More here.

BY: DAVID KERSTEIN, Peak Performance Consulting Group, and DAN MERCURIO, Cambridge Savings Bank. This article was originally published in BAI Banking Strategies.

Compelling digital offerings aren’t just a consumer expectation anymore. They are a necessity to stay competitive.

But many financial institutions, especially smaller ones, are stuck in a holding pattern—with too many confusing options and choices to grasp a clear sense of how to move forward. What’s the best way to harness new digital technology to deliver the desired results? How should you select the right partner? What key strategies lead to successful implementation?

If there remains any question that the FinTech revolution is disrupting the banking ecosystem, just ask Millennials: 73 percent believe innovation will come from outside the industry and 33 percent believe they won’t need a bank at all to serve their financial needs.

With the current technology sprint, it’s often hard to make sense of it all. (The iPhone, after all, is only 10 years old.) Today, FinTech startups don’t compete with banks head-on but focus instead on specific services historically integrated within the bank’s core offerings. It can feel like death by a thousand cuts.

Let’s step back a moment and consider this from the customer’s perspective. Leading FinTechs are competitive because they focus on products and segments banks don’t serve well, such as micro-business lending, unsecured lending and roboadvisory. FinTechs also show particular skill at creating a frictionless, intuitive customer experience. Many offer faster payment processing. Others provide simplified, instant business loan processing by connecting directly to information sources for verification, instead of relying on customers to gather and provide paperwork.

In our view, partnering with innovative FinTechs instead of trying to develop solutions in-house is a no-brainer. Jamie Dimon, CEO of JP Morgan Chase, described it well: “(FinTech partnerships) offer the kind of stuff we don’t want to do or can’t do, but there’s someone else who can do it.”

For years, community banks have tried, with varying degrees of success, to boost fee income through wealth management. Now, thanks to the robo-advisory trend, smaller banks can compete more effectively, even with larger, more established players according to a new article in ICBA’s Independent Banker Magazine, Say Hello to Your New Employee.

The article highlights the experience of Cambridge Savings Bank and quotes David Kerstein, president of Peak Performance Consulting Group.

“A robo-advisor allows banks to have the potential for greater control over their services, and it allows them the opportunity to be able to service more of their customers and to manage it under their brand,” according to Kerstein.

“Conventional wisdom would say that robo-advisors would be more important to younger, more digitally savvy customers, but that’s not necessarily the case. For Cambridge Savings, the Connect Invest platform has gained widespread interest; its average user is 47-48 years old. ‘It’s not just millennials.’ says Kerstein, a consultant to the bank.”

For years the industry’s eyes were on Wells Fargo as a cross-selling winner. That reputation went down in flames with last year’s sales scandal. But banking’s eyes continue to scan Wells, which recently introduced a revamped performance management and rewards program that the bank’s leadership described as a beginning, subject to revision based on ongoing experience.

“The devil is in the details,” and the potential improvement lies in careful monitoring were points of agreement among experts interviewed by Banking Exchange who looked at the summary released by the bank earlier in January.

“It’s a very positive step,” says David Kerstein, president of Peak Performance Consulting Group. “I’m pleasantly surprised that they have taken such aggressive steps. I think this is the right way to go for the industry, not just for Wells Fargo.”

He says it would be essential to use such tools as mystery shopping to have an independent view of how well the program works where customer meets banker.

“You have to be sure that you are building customer relationships and doing the right thing,” says Kerstein. “Wells had lost sight of the overall customer,” he adds, in its earlier emphasis on cross-selling. If the bank can make the team dynamic work and produce the longer-term results it hopes for, that will be a very positive development, he says.

Further, if employees can truly work as a team, and the incentives pay off in that context, “turnover may be reduced,” Kerstein adds.

As consumers and small businesses shift to alternative channels, it is critical that financial institutions improve the operational and sales efficiency of the brick and mortar channel. That means fine tuning every point of contact to optimize effectiveness.

Financial institutions of all sizes are facing challenges to their retail branch system. Technological innovation, starting with the introduction of ATMs, then internet banking, and most recently mobile banking, has resulted in declining branch usage. Consumers and businesses don’t need to go to the bank as frequently as they did in the past now that routine monetary and service transactions can be easily handled on a personal computer or smartphone.

Consumers want branches, but declining usage is reducing sales opportunities and revenue growth. As routine servicing and monetary transactions continue to migrate out of the retail branch, the fundamental nature of bank branches must undergo a dramatic transformation.

The bottom line is that, with fewer teller transactions, branches must become more efficient as sales and marketing centers. This can be achieved through greater micro-market targeting of marketing messages in order to maximize the sales opportunity from limited branch traffic and to optimize trade area sales penetration.

Up to now, many financial institutions have employed a one-size-fits-all strategy. Branches are often similar in size and style with limited differentiation. More importantly, marketing strategies are frequently implemented uniformly across the network with limited variation of messaging based on unique branch or trade area characteristics.